Jodhpur: The Rajasthan High Court has quashed an order cancelling the drug license of a Jodhpur-based medical agency, holding that the Licensing Authority cannot impose the “extreme penalty” of cancellation without issuing a fresh show cause notice specifically for that purpose, even if the license was already under suspension for the same alleged irregularities.
Justice Kuldeep Mathur delivered the ruling while deciding S.B. Civil Writ Petition No. 4432/2025, Jhanwer Medical Agencies vs State of Rajasthan & Ors., filed by the petitioner firm challenging the cancellation of its retail and wholesale drug licenses.
The petitioner firm, Jhanwer Medical Agencies, held a license for drug business valid until May 2027. The controversy began in September 2023 when an FIR was registered against the proprietor for alleged irregularities in maintaining stocks and supplying drugs under the Rajasthan Government Health Scheme (RGHS), which reportedly caused fiscal loss to the government. Following an investigation, the Assistant Drug Controller issued a show cause notice on March 19, 2024, alleging violations of the Drugs and Cosmetics Act, 1940. After considering the petitioner’s reply, the authority initially suspended the firm’s license for 60 days starting June 20, 2024. However, on September 23, 2024, after the suspension period had ended, the Licensing Authority passed a subsequent order cancelling the license entirely, an action that was later upheld by the Appellate Authority on January 3, 2025.
Before the High Court, counsel for the petitioner argued that while a notice was issued before the suspension, no fresh notice was served before the drastic step of cancellation. It was submitted that suspension and cancellation are distinct penalties with different consequences; while suspension is temporary, cancellation permanently extinguishes the right to carry on business and affects the right to livelihood. Opposing the petition, the Additional Advocate General argued that Rule 66(1) does not explicitly require separate notices for suspension and cancellation. The state contended that the initial suspension was intended to facilitate an inquiry and that the petitioner’s reply to the first notice had already been considered.
After hearing the parties, the Court examined the legal requirements under Rule 66(1) of the Drugs and Cosmetics Rules, 1945. The Court observed that although suspension and cancellation appear in the same provision, they are two distinct powers. The Court noted that since the authority chose only to suspend the license initially, it indicated that it had not formed a definitive opinion to cancel the license at that stage. Therefore, if a subsequent inquiry suggested that cancellation was warranted, a fresh notice stating the reasons for such a decision was mandatory. The Court held that the failure to provide an opportunity for a hearing specifically regarding the cancellation resulted in a violation of the principles of natural justice.
Holding that the requirement of a show cause notice is a substantive safeguard intended to ensure fairness, the High Court declined to sustain the cancellation. The Court accordingly quashed the orders dated September 23, 2024, and January 3, 2025, while clarifying that the authorities remain free to initiate fresh proceedings by following the prescribed legal procedure and issuing a fresh show cause notice.
